Home buyers strategically postpone taking out mortgages, aiming to profit from a potential decline in interest rates
In a recent statement, Tribhuwan Adhikari, Managing Director & CEO of LIC Housing Finance Ltd, revealed that home loan growth in India is currently experiencing a significant slowdown [1][2]. This slowdown, according to Adhikari, is due to potential home loan borrowers delaying their decisions, largely due to high property prices, macroeconomic uncertainties, and cautious lending practices by banks [1].
Adhikari's observations align with the Reserve Bank of India's (RBI) data, which suggests that prospective home loan borrowers are indeed watching interest rates and making borrowing decisions accordingly [1]. The RBI's decision to cut rates by 100 basis points initially sparked hopes for a significant increase in demand, but these hopes have yet to materialise [1].
The slowdown in home loan growth is evident in the figures. Home loan growth has decelerated to 9.6% year-on-year (y-o-y) as of June 27, 2025, a stark contrast to the 36.3% y-o-y growth seen as of June 28, 2024 [1]. In FY26 so far (up to June 27, 2025), housing loan growth has declined to 1.9% from 2.9% as at June 28, 2021 [1].
Loan growth at LICHFL, one of the leading housing finance companies in India, is currently in single digits, with just 3% growth in disbursements in the first quarter [1]. Adhikari expects this situation to change, with loan growth at LICHFL climbing to double digits from the third quarter [2].
Adhikari attributes this anticipated growth to the lower borrowing costs for new borrowers, which will result from the reduction in the repo rate being transmitted into lending rates of banks and housing finance companies (HFCs) [2]. The RBI is expected to reduce the repo rate in two tranches of 25 basis points by December 2025 [1][2].
Many borrowers are taking into account the likelihood of further rate cuts and are preferring to wait for lower interest rates and EMI outgo before taking a loan [1][2]. This strategy is not uncommon, as borrowers aim to reduce their overall borrowing costs and ensure affordability amid flat wage growth and inflationary pressures [1].
Despite the current slowdown, Adhikari remains optimistic about the future of home loan growth in India. He notes that there is a growing demand for affordable housing, which could drive growth once market conditions improve [2].
In summary, the combination of expensive real estate, economic uncertainty, cautious bank lending, and changing borrower priorities is causing potential home loan borrowers in India to postpone their decisions [1][2]. However, with the RBI's expected rate cuts and the growing demand for affordable housing, there is hope for a revival in home loan growth in the near future.
[1] Business Standard, August 2, 2025 [2] Economic Times, August 2, 2025
- The slowdown in home loan growth in India is influenced by several factors, including high property prices, economic uncertainties, and cautious lending practices, as stated by Tribhuwan Adhikari, the Managing Director & CEO of LIC Housing Finance Ltd.
- The RBI's data corroborates Adhikari's observations, indicating that prospective home loan borrowers are carefully watching interest rates before making borrowing decisions.
- Potential borrowers are also adopting a strategy of waiting for lower interest rates and EMI outgo, aiming to reduce their overall borrowing costs and ensure affordability amid flat wage growth and inflationary pressures.
- Despite the current slowdown, Adhikari maintains a positive outlook for the future of home loan growth in India, citing the growing demand for affordable housing and the anticipated repo rate cuts by the RBI as factors that could drive growth in the near future.
